In turn, they can invest more in prices, giving them a
distinct advantage over competitors, Mike Paglia, director
of retail insights for Kantar Retail, told Business Insider.

"These retailers have very clear value positions
that stand out in the marketplace — that's whats driving their
growth," Paglia said.

Aldi, for example, doesn't invest in shelves for many
of its products.Instead, the
items are stacked on top of each other in the boxes they
were shipped in.This reduces the time it takes to
keep the store stocked. At Aldi, items are stacked
on top of each other in the boxes they were shipped
in.Business Insider/Hayley
Peterson

The chain also requires customers to put down a 25-cent
deposit to use carts, which they get back once they return the
cart so the company doesn't have to pay an employee to
round up the carts.

As a result, Aldi, which is in the midst of a $3 billion
expansion in the US, can invest more in keeping prices
low.

Dollar General also limits its investments in
store infrastructure and labor.

Dollar General features narrow aisles and basic metal
shelving.Hayley
Peterson

Each store — which ranges between 7,000 and 10,000 square
feet — costs about $250,000 to build and pays for itself within
two years, according to UBS. By comparison, the average Starbucks
store is about
1,700 square feet and reportedly costs about
$450,000 to build.

Thanks to their relatively small size, the
stores require very little labor. Dollar
General typically staffs
onlytwo to four
employees at a time to work the registers and keep the shelves
stocked, according to our store visits.

Dollar General fills carts with discounted merchandise
by the register to encourage impulse
purchases.Hayley
Peterson

There are only two registers in most Dollar General
stores.

The no-frills model has been successful for Dollar
General. The company's sales were up nearly 8% in fiscal
2015 and it's planning an aggressive expansion,
opening more than 2,000 stores within the next two years and
bringing its total number of stores to about 14,500.

Trader Joe's targets a wealthier demographic than Aldi and
Dollar General, but it offers a similar value proposition with a
simple, uncomplicated shopping experience.

Trader Joe's doesn't release sale numbers, but
studies have shown it sells about twice as much per square
foot as Whole Foods.

Similarly, warehouse stores like Costco and Sam's
Club also target a higher demographic with low prices
and a shopping experience that's far from fancy.

Costco.Paul Sakuma/AP Images

The stores feature concrete
floors and industrial metal
shelving and like Aldi, stack some items on top of each other in
their original packaging.

But customers keep coming back to these stores because they
offer such competitive prices.

Aldi, for example, is 30% cheaper than Walmart, according
to a
recent price check; Dollar General is about 20% cheaper
than traditional grocery stores and 40% cheaper than convenience
stores, according to UBS; and Trader Joe's is 26%
cheaper than Whole Foods.

Does this mean merchandising is dead?

No, not according to Kantar Retail's Paglia. He says
there are still plenty of consumers who prefer the shopping
experience that stores like Whole Foods offer.

But sales trends aren't in Whole Foods' favor. The chain's
same-store sales dropped 1.8% in its most recent quarter and
the company's stock has lost 9% of its value so far this year.
Dollar General's same-store sales, by comparison, rose 2.2% in
its most recent quarter, and the company's stock price has
increased 20% over the same time period.